Thursday, January 17, 2002

CPA Firms Adopting the Corporate

CPA Firms Adopting the Corporate Approach ::: At the recent Winning is Everything conference, I picked up a copy of Practical Accountant magazine. The cover story is about “Going Corporate” – a trend among growing accounting firms. What accounting firms are realizing, according to those interviewed, is that traditional services-based businesses often have thinner profit margins than other industries. In addition, the larger these firms get, the harder they are to manage by the traditional partnership model (long live committees!).The article talks about a number of firms who have gone corporate. One thing this move allows? The development of product lines rather than billable-hour services. Margins are higher, cross-selling is easier, and the firms can scale faster.

Perhaps most surprising (at least to anyone who’s spent time working with law firms) was this quote:

“Tom Schulte, managing partner of RBZ in Los Angeles, cites law firms as the inspiration for his firm going the corporate route. “I always wondered how law firms got 80 partners in a room and heard them all,” he says. “The answer is, they don’t.” (emphasis added)

True enough Tom. But did it ever occur to you that most firms haven’t moved beyond the problem? Few law firms today are truly corporate in structure, and among those hardly any are developing “ products” to sell their clients.

A corporate model – where there is a professional management team in place that doesn’t bill time to clients – is rare among professional services firms. As this article notes, it can be very threatening to a professional to give away or abandon their book of business. However, some accounting firms seem to have figured out that the alternative – more scalable business models, higher profits, better leverage – is enough to convince a few to try it out.